Insurance bonds (otherwise known as investment bonds), offered through insurance companies and friendly societies, have existed for many years and offer a tax paid investment that enable investors to save for significant life events.

Once you make an initial investment, your money is invested for your specified purpose until a maturity date, usually 10 years.

Key features

Enable you to make ad-hoc or regular contributions to the fund and the funds are invested into the market.

Bonds are usually invested in a range of managed funds, offering varied investment options from cash to shares to suit different risk profiles.

Earnings on the bond are taxed within the bond, generally at a rate of 30 per cent, and you do not need to show the earnings as part of your own assessable income.

You are not required to pay capital gains tax on the bonds when you redeem your investment. For those on a higher tax bracket, an insurance bond can reduce the amount of tax that you pay on your investment earnings, a key benefit for those on higher tax brackets.

You can access your investment at any time, however there are certain tax benefits available to you if you retain the bond for 10 years or more.

You can use the proceeds of the bond however you wish with no implications on the amount you get back.

Unlike education savings plans you do not get the tax paid within the fund back if you use the proceeds for education purposes. This can represent a sizeable amount so if you are saving for education then education savings plans offer a unique advantage.

Establishment and ongoing costs apply.

Seek financial advice if you want to invest in this option to ensure that it is suitable for your needs.